Washington DFI Issues Two Regulatory Interpretations, More Expected
March 8, 2013
March 8, 2013
The Washington Department of Financial Institutions (DFI) offered clarification on two regulations impacting state-chartered credit unions—one related to credit unions’ use of the terms “audit committee” and “supervisory committee,” and another outlining to credit unions’ investment options and restrictions for funding employee benefit obligations.
In a letter addressed to Northwest Credit Union Association Director of Regulatory Advocacy John Trull, DFI Division of Credit Unions (DCU) Director Linda Jekel explained that the terms ‘audit committee’ and ‘supervisory committee’ are seen as interchangeable for regulatory purposes as long as the committee is compliant with supervisory committee regulations.
“The Division of Credit Unions is of the view that a State Credit Union may use the term ‘audit committee’ synonymously and in place of ‘supervisory committee’ in its bylaws,” Jekel wrote, “as long as it complies with the same requirements for a supervisory committee contained in the Act and all applicable rules for a supervisory committee of a federally insured credit union.”
The second letter came from Joseph Vincent, DFI’s general counsel, in response to an inquiry from Parker Cann, BECU’s general counsel. Vincent confirmed that state-chartered credit unions in Washington may fund employee benefit trusts with investments typically unavailable to credit unions as long as those investments are not made by the credit union for its own financial gain, giving state-chartered credit unions permissions already available to credit unions with federal charters.
“Although DFI regulation requires a state credit union to obtain DFI approval to make investments that federal credit unions have previously received permission to make, this regulation applies to investments made by the State Credit Union on its own behalf, and not to investments made to fund employee benefit obligations pursuant to the federal parity provision,” Vincent wrote. “All of the restrictions and requirements outlined in the State Credit Union investment regulation are directed at the credit union’s investment of funds for its own benefit for the purpose of generating income. However, investments made to fund employee benefit obligations do not fall into that category precisely because they are made not for the credit union’s own benefit but for the benefit of its employees.”
Vincent went on to further clarify that National Credit Union Administration (NCUA) regulations still apply, saying that “in making such investments, a State Credit Union is subject to all of the limitations set forth in the aforementioned NCUA regulations and other NCUA authority interpreting or applying those regulations.”
Trull said that both responses represented favorable interpretations for credit unions, and that further guidance pertaining to bank-owned life insurance is expected soon as well.
“These are both very positive developments, and another is on the horizon,” Trull said. “It’s encouraging to see the positive working relationship we have developed with regulators continuing to develop, and we expect that relationship to continue to translate into better outcomes for credit unions.”
The NWCUA Regulatory Advocacy team works with state and federal regulators to help reduce the regulatory burden on credit unions and protect the credit union movement. The Association encourages members to participate in the regulatory process. If you have any questions about these or any regulatory issues, please contact Director of Regulatory Advocacy John Trull at firstname.lastname@example.org, or at 503.350.2209.
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